News

DTH Moves Two Steps Ahead in Israel

12/13/1998 7:00 PM Eastern

TEL AVIV, Israel -- Direct-to-home television in Israel
took two major steps forward as the country's Supreme Court rejected a challenge to
its introduction from Israeli cable operators and three groups officially threw their hats
into the DTH ring.

The Israeli cable companies' case against DTH was
dismissed on Nov. 29 by Israel's Supreme Court, which cleared the way for DTH
services to launch by late 1999. Following the Supreme Court decision, Israel's
Ministry of Communications received three DTH bids by its Dec. 6 submission deadline.

The group seen as the strongest bidder is DBS Satellite
Broadcast. Its biggest shareholder is Israeli national telco Bezeq, which owns 37.5
percent.

A second bidder, as yet unnamed, is led by investment
company Clal Investments Ltd. and Ronald Lauder's Jerusalem Capital Studios. Due to
Clal's indirect stake in cable operator Tevel Israel International Communications
Ltd. and Israeli broadcaster Channel 2, Clal may be forced to drop out.

Insiders suggest that those two groups may merge. Bezeq
spokesman Ronni Mandelbaum didn't rule out the possibility.

"The question is whether there is room for three -- or
even four -- companies," said Mandelbaum. "In a small and saturated market, our
studies suggest there is a profitable market for no more than two companies."

A third group, led by private investors Prosper Abitbul and
Arik Ben Hamu, said it has signed agreements with a handful of companies that help make
its bid viable.

A second round of bidding will take place within six months
to a year.

The licenses are expected to be awarded by mid-January. At
that point, the next hurdle will be the $15 million payment license-holders will have to
make to the Ministry of Communications. This could prompt a merger.

"It seems reasonable that two groups at least should
merge," said Eli Nissan, head media consultant to the Israel Broadcasting Regulatory
Administration.

DTH services could launch six months to nine months after
the licenses are awarded.

Israel's three major cable companies are still
negotiating a settlement with the government over the planned introduction of DTH.

Golden Channels, Tevel Israel International Communications
Ltd. and Matav Cable Systems Ltd. had filed suit in an effort to block satellite services
from launching in Israel, claiming that they had been granted exclusivity to download
satellite broadcasts for retransmission. They demanded compensation for future losses
resulting from competition.

Although the Supreme Court reaffirmed the right of the
Ministry of Communications to go ahead with DTH, it is still uncertain whether the cable
companies will receive any compensation. In its Nov. 29 ruling, the Supreme Court urged
the ministry and the cable companies to reach an agreement over compensation. If they fail
to do so within three months, they will have to return to court.

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